Get ready for volatility in telecom sector: Rohit Agarwal, Kotak Life Insurance

In a chat with ET Now, Rohit Agarwal, Equity Fund Manager, Kotak Life Insurance, says currently the market believes that all three will gain which is unlikely to be true. One will have to wait and watch as the events fold. Edited excerpts:

ET Now: Reliance is now showing that it could well be the leader and the incumbents in telecom could well be followers. Having said that, for all the bear voices that one could hear on telecom, the stocks are trading very close to their highs. Be it Idea, be it Bharti, they did succumb to a bit of selling on Thursday but otherwise hit those fresh 52 week highs and Reliance is moving up as well. What do you do with the telecom space?

Rohit Agarwal: As you said, the news has been positive or negative for all the different telecos but most of the stocks are at close to highs. This volatility is likely to continue. In the coming days, we might hear about a big mega merger or we might also see one or two of the competitors coming and matching whatever offer the big behemoth has currently made.

In that case, the calculations will start to change again. We are going to brace for volatility ahead and it would be very difficult to calculate the EBITDA or the ARPU numbers for all the three big telecos or the four players right now who are in the foray.

It will take some time for it to settle down. May be it will take a couple of months or couple of quarters for clarity to emerge. Currently the market believes that all three will gain which is unlikely to be true. So you will have to wait and watch as the events fold.

ET Now: Where do you see pockets of strength even now and value on the table?Rohit Agarwal: Pockets of value still lie in the market. There are pockets of value in some of the select private banks. It may also now emerge in some of the auto companies which if you see in the series in the last month or so have actually not done as well due to a variety of reasons and you may also see a pocket of value in some of the discretionary names which got hammered down after the demonetisation.

These are the sectors where you may see selective interest coming up and you would see some value buying and probably with the lag of a quarter or so where the impending GST will be rolled out.

When you get clarity on the GST rates and the clarity on what is to be done with the stock in trade for say the inventory that would be lying at the distributor level, you will see some value buying emerging in some of these names which have been hammered down.

Separately, RCom initiated contempt proceedings in the apex court against the Department of Telecommunications, blaming it for delaying a spectrum sale that would have enabled dues to be paid to Ericsson and lenders.